During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

ECRI uses a highly nuanced “many-cycles” view to understand the complex dynamics of the global economy.

To monitor the U.S. economy alone, we use an array of more than a dozen specialized leading indexes in the context of the ECRI framework for incorporating various sectors and aspects of the economy.

The ECRI framework covers 21 economies, incorporating well over 100 proprietary indexes designed to be comparable across borders.

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A Stealth Slowdown

Everyone is focused on rising inflation, which has now hit the Fed’s target. So, given the three-handle on the jobless rate, Fed rate hike probabilities have been rising, even as the other major central banks have turned a bit more dovish, pushing up the U.S. Dollar.

All of this is consistent with the widespread belief that, even if global growth may be slowing, U.S. economic growth is strong and set to speed up. But ECRI’s research shows that the rise in inflation and interest rates is masking a stealth slowdown in economic growth.

Part of our process is to track where we are today in the economic cycle. And the key coincident data that define the economy outside your window include not just output and employment, but also income and sales.

As the chart shows, the year-over-year growth rates of real personal income and consumer spending started to roll over late last year. Toward the right side of the chart you can see that consumer spending growth is at a two-year low, and with income growth even weaker, the difference must be made up with borrowing.

Already, for smaller banks, delinquencies are at their highest reading since the Great Recession, with credit card delinquencies rising since early 2015, when income growth fell below consumer spending growth. The cumulative income shortfall relative to consumer spending since that point is now approaching 1% of GDP.

This is not a good set up. We have monetary policy tightening in the face of this stealth slowdown, when the consumer – who’s almost 70% of the economy – is under growing pressure.